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COMMODITY CHARTBOOK

Notable trends:

  • Coffee prices ticked up +3.6% over the past week, but are down -35.6% on a year-over-year basis as global supply continues to outpace demand.  Low coffee prices will remain a strong tailwind for SBUX, DNKN, GMCR, KKD, THI and other coffee retailers in 4Q13 and throughout 2014.
  • Dairy costs have been volatile, but a favorable comparison in 4Q could support the outlook for CAKE, TXRH and others with exposure to dairy costs, if prices stay at or near current levels.
  • Corn and wheat prices continue to provide retailers, restaurants and consumers with lower food costs than a year ago.
  • Beef prices have been trending up YTD and should continue to pressure margins for BLMNTXRH, CMG, WEN and others with significant exposure.
  • Gasoline prices ticked up 40 bps over the past week, but are down -6% on a year-over-year basis and have provided consumers with some relief.  We will continue to monitor this trend, as any sustained increase or decrease in gas prices could have a significant impact on the direction of discretionary spending.

COMMODITY CHARTBOOK - chart1

 

 

Notable correlations:

  • Strong correlation to the USD over the past 30 days:
    • Milk +0.93
  • Strong negative correlation to the USD over the past 30 days:
    • Wheat -0.93
    • Gasoline Prices -0.92
    • Chicken Wings -0.89
    • Sugar -0.88
    • CRB Foodstuff Index -0.82
    • Coffee -0.76

 

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Howard Penney

Managing Director

 

 


DAILY TRADING RANGES, REFRESHED

This note was originally published November 22, 2013 at 07:55 in Daily Trading Ranges for Hedgeye subscribers. If you would like to learn more and subscribe click here. 

DAILY TRADING RANGES, REFRESHED - jose1

 

BULLISH TRENDS

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DAILY TRADING RANGES, REFRESHED - Slide7

 

BEARISH TRENDS

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Will They or Won't They?

Client Talking Points

THE FED

The trillion dollar question: When does the Fed taper? Probably not one week before Christmas (the FOMC meets DEC 17-18). In fact, we are increasingly of the view that the Fed is aware of the systemic risk present in the bond market and is potentially setting up to never commence tapering. They will likely accomplish this by setting far-too-aggressive targets for GDP growth and shifting their focus to combating a perceived risk of deflation, at the margins.

S&P 500

We continue to think the great rotation out of debt and back into stocks is: A) still on; and B) will provide a structural bid to the equity market. That said, we now think that bid could be from lower prices as proxy hedging activity from distressed fixed income investors (not to be confused with investors that invest in distressed debt) weighs on broader asset prices in the interim. Our immediate-term Risk Range for SPX is 1785 - 1805.

Asset Allocation

CASH 44% US EQUITIES 10%
INTL EQUITIES 10% COMMODITIES 6%
FIXED INCOME 6% INTL CURRENCIES 24%

Top Long Ideas

Company Ticker Sector Duration
FXB

Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged.  If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.

WWW

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.

TROW

Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road

TWEET OF THE DAY

We're 1 Hilsenrath whisper of no-taper away from 1802 $SPY #TaperTalk @KeithMcCullough

QUOTE OF THE DAY

"Last night would have been a hell of a night to assassinate a President." -John F. Kennedy, two hours before his assassination

STAT OF THE DAY

Massive inflows into Equities this week... (+$7.2 billion versus -$7.5 billion outflows in Bond funds) This is the widest weekly spread between debt/equity of the year.


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THE M3: JAPAN; VISITATION; FISHERMAN'S WHARF

THE MACAU METRO MONITOR, NOVEMBER 22, 2013

 

 

JAPAN RULING LDP PANEL APPROVES DRAFT OF CASINO GAMBLING BILL Bloomberg

A draft of a bill legalizing casinos was approved by a panel of lawmakers from Japan's ruling Liberal Democratic Party.   “We are now able to move forward,” said Ryosei Akazawa, head of the party’s transport panel, who said he had now been placed in charge of shepherding the legislation through the approval process.  The next step will be to take the bill to the party’s policy panel for official backing.


A cross-party group of lawmakers headed by LDP deputy Secretary General Hiroyuki Hosoda has said it’s preparing to submit the casino legalization bill to parliament in the current session, which ends Dec. 6.  It is unclear whether junior coalition partner New Komeito will agree to support the bill.  Generally legislation submitted under Abe’s administration has been backed by both parties.

 

“We just listened to the arguments today,” Komeito lawmaker Kiyohiko Toyama said after a meeting on the bill. “We haven’t decided anything as a party.”

 

MACAU VISITOR ARRIVALS FOR OCTOBER 2013 DSEC

Visitor arrivals increased by 2% YoY to 2,394,195 in October 2013.  In October 2013, visitors from Mainland China increased by 5% YoY to 1,514,373, coming primarily from Guangdong Province (708,375) and Fujian Province (64,801); Mainland visitors travelling under the Individual Visit Scheme totaled 677,292.  Moreover, visitors from Taiwan, (89,248) and the Republic of Korea (38,632) increased by 3% and 12%, while those from Hong Kong (543,580) registered a 4% decrease.  The average length of stay of visitors held stable from a year earlier, at 1.0 day in October 2013.

 

THE M3: JAPAN; VISITATION; FISHERMAN'S WHARF - macau

 

FISHERMAN'S WHARF REVAMP WORK TO END IN 2016 Macau Business

Macau Legend Development David Chow Kam Fai expects the redevelopment of Fisherman’s Wharf to be completed in 2016.  The work began in August.  Chow said the redevelopment will cost HK$6.8 billion (US$877 million).  The redeveloped Fisherman’s Wharf will have three new hotels, a dinosaur pavilion and a technologically advanced cinema.



THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – November 22, 2013


As we look at today's setup for the S&P 500, the range is 20 points or 0.60% downside to 1785 and 0.51% upside to 1805.                                                         

                                                                      

SECTOR PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:

 

THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  

 

CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.50 from 2.51
  • VIX closed at 12.66 1 day percent change of -5.52%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:40am: Fed’s George speaks in Paris
  • 10am: JOLTs Job Openings, Sept., est. 3.840m (prior 3.883m)
  • 11am: Kansas City Fed Mfg Activity, Nov., est. 6 (prior 6)
  • 11am: Fed to purchase $1.25b-$1.75b in 2036-2043 sector
  • 12:15pm: Fed’s Tarullo speaks in Washington
  • 1pm: Baker Hughes rig count

GOVERNMENT:

    • President Obama hosts King Mohammed VI of Morocco at White House
    • 10:15am: Sec. of Defense Chuck Hagel meets with Canadian counterpart Rob Nicholson to discuss defense relations, sign Canada-U.S. Asia-Pacific Defense Policy Cooperation Framework

WHAT TO WATCH:

  • J&J said to narrow bidder list to 3 for diagnostics business
  • Robin Hood conf. continues today w/ Ackman, Druckenmiller
  • Paulson changes tone to say he won’t add more to gold fund
  • Apple recoups most Samsung damages cut from 2012 verdict
  • Gap’s profit forecast signals holiday quarter may disappoint
  • EMA monthly CHMP announcements today from 7am NY time
  • Novartis to buy back $5b in stock, add business segments
  • German business confidence rises in sign recovery on track
  • Apple supplier Foxconn to invest $40m in Pennsylvania
  • Party City readies for IPO in early 2014, Reuters says

EARNINGS:

    • Ann Inc. (ANN) 7:45am, $0.87
    • Foot Locker (FL) 7am, $0.66 - Preview
    • Hibbett Sports (HIBB) 6:30am, $0.65
    • PetSmart (PETM) 9:05am, $0.86 - Preview
    • Sirona Dental Systems (SIRO) 6:30am, $0.80

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Paulson Changing Tone Said to Say He Won’t Add More to Gold Fund
  • Gold Analysts Most Bearish Since June on Fed Taper: Commodities
  • Codelco ‘Optimistic’ on China Copper Demand on Middle Class
  • Gold Swings Near Four-Month Low as Investors Weigh Fed Tapering
  • WTI Crude Set for First Weekly Gain in Seven; Iran Deal Falters
  • Taylor, Jamison Outpace Commodity Hedge Funds Seeing Losses
  • Aluminum Fees in Japan Seen Near Record in First Quarter on Abe
  • Copper Poised for Weekly Gain on Stockpiles, China: LME Preview
  • Rebar Caps First Weekly Gain in Three on Mill Price, Inventory
  • Western Bulk Says China Minor-Bulks Rose 19%; Supramaxes to Gain
  • Shale Boom Pits U.S. LPG Against Mideast in Asia: Energy Markets
  • South African White Corn Climbs to Highest in More Than 7 Months
  • Gold Option Wagers on Surge to $3,000 Was Most-Active Yesterday
  • German Gold Assets Drop 0.1% in October in First Cut Since June
  • Copper Gains Amid Signs Recovery Picking Up as Stockpiles Shrink

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 

 

 


November 22, 2013

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BULLISH TRENDS

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BEARISH TRENDS

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